Thursday, March 15, 2007

IMPORT OF GOOD & SERVICES

Application :

Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made on the appropriate Form A-1.

Import Licenses :

  • AD banks may freely open letters of credit and allow remittances for import of goods unless they are included in the negative list requiring license under the Foreign Trade Policy in force.
  • In such cases, licenses marked ‘For Exchange Control purposes’ should be called for and special conditions, if any, attached to such licenses adhered to.
  • Exchange Control Copy of the import license submitted by the importer for opening a Letter of Credit or making remittance, when fully utilised, should be retained by the AD banks and may be preserved till its scrutiny by the internal auditors or inspectors is completed. 
Purchasers obligation : 
 Use of Foreign Exchange: In terms of Section 10(6) of the Foreign Exchange Management Act, 1999 (FEMA), any person acquiring foreign exchange is permitted to use it either for the purpose mentioned in the declaration made by him to an Authorised Dealer under Section 10(5) of the Act or to use it for any other purpose for which acquisition of exchange is permissible under the said Act, or Rules or Regulations framed there under. Furnishing Evidence: Where foreign exchange acquired has been utilised for import of goods into India the AD bank should ensure that the importer furnishes an evidence of import to his satisfaction. Mode of Payment for import can also be made by way of credit to non-resident account of the overseas exporter maintained with a bank in India.

Advance Remittance for Imports 
AD banks may allow advance remittance for import of goods without any ceiling subject to the following conditions:

Remittance : 
The remittance is made directly to the supplier or manufacturer of the goods and not to any third party or to a numbered account.

Import :  

Physical import of goods into India is made within six months (three years in case of capital goods) from the date of remittance and the importer gives an undertaking to furnish documentary evidence of import within fifteen days from the close of the relevant period.

Non - Import : 

In the event of non-import of goods, AD bank should ensure that the amount of advance remittance is repatriated to India or is utilised for any other purposes for which release of exchange is permissible under the Act, Rules or Regulations made there under.

Guarantee : 

  • Letter of Credit or Guarantee: f the amount of advance remittance exceeds USD 100,000 or its equivalent, an unconditional, irrevocable standby Letter of Credit or a guarantee from an international bank of repute situated outside India or a guarantee of an AD bank in India, if such a guarantee is issued against the counter guarantee of an international bank of repute situated outside India, is obtained. 
  • In cases where the importer (other than a Public Sector Company or a Department/Undertaking of the Government of India/State Governments) is unable to obtain bank guarantee from overseas suppliers and the AD bank is satisfied about the track record and bonafides of the importer, the requirement of the bank guarantee / standby Letter of Credit may not be insisted upon for advance remittances up to USD 1,000,000 (US dollar one million). AD banks may frame their own internal guidelines to deal with such cases as per a suitable policy framed by the bank's Board of Directors.  
  • Waiver from Ministry of Finance: A Public Sector Company or a Department/Undertaking of the Central/State Government/s which is not in a position to obtain a guarantee from an international bank of repute against an advance payment, is required to obtain a specific waiver for the bank guarantee from the Ministry of Finance, Government of India before making advance remittance exceeding USD 100, 000.
Time limit for settlement of Import payments :  

Remittances against imports should be completed not later than six months from the date of shipment, except in cases where amounts are withheld towards guarantee of performance etc.

International Factoring : 

AD banks may enter into arrangements with international factoring companies of repute, preferably members of Factors Chain International, without the approval of Reserve Bank. However, they will have to ensure compliance with the extant foreign exchange directions relating to imports, Foreign Trade Policy in force and any other guidelines / directives issued by Reserve Bank in this regard. 

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